The High Cost of Starting a Marijuana Cultivation Facility

Marijuana prices would be through the roof if it weren’t for wholesale cultivators operating in legal marijuana states. These growers are able to provide medical marijuana dispensaries and recreational dispensaries with more supply than there is demand, oftentimes leading to lower prices. But it’s an expensive industry to get started in – indoor cultivators spend an average of $75 per square foot in startup costs, according to the Marijuana Business Factbook 2017.

Average startup costs for other types of cultivation operations:

Greenhouses – $50/sqft

Indoor/Greenhouse combination – $17/sqft

Outdoor cultivators – $10/sqft

Growing mediums also play a role in scaling operations for optimum profitability. Greenhouse growers prefer soil as their medium by at least 50-percent. Combination cultivators prefer soil by 74-percent, while indoor growers use soil only 32-percent of the time.

The Factbook states that, “Growing mediums are an important part of cultivators’ ongoing efforts to scale their operations – increasing yields and boosting quality to remain viable in an increasingly competitive market. Each method has its benefits and drawbacks, and advances in cultivation technology continues to change the equation.”

“In recreational markets especially, surging consumer demand prompted many new entrepreneurs to enter this segment of the market, raising the level of competition while driving the price of wholesale cannabis to record-low levels. That’s made it all the more important for growers to find efficient ways of producing high-quality cannabis on a consistent basis,” the Factbook noted.

The number of cultivators in legal markets continues to grow.

“More growers entered the industry upon recreational legalization, and existing MMJ cultivators greatly expanded their operations,” stated the Factbook. “Despite rising adult-use sales, the increase in production proved even greater than demand – sending wholesale cannabis prices plummeting. Some cultivators that shelled out for expensive indoor facilities are finding that costs of production now exceed the market price per pound of cannabis.”